Morning Commentary: Junk steadies ahead of Powell speech; Macau gaming paper improves

By Paul A. Harris

Portland, Ore., Nov. 30 – The high-yield bond market was unchanged at mid-morning as investors prepared to parse remarks expected later in the day from Fed chairman Jerome Powell for any indication that the central bank might dial back the magnitude of interest rate increases it is using to combat inflation, sources said.

With the S&P 500 stock index off 0.32% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down a dime, or 0.13%, at $74.44.

The Spirit AeroSystems 9 3/8% senior secured notes due November 2029 (Ba2/BB-) were unchanged at 104 3/8 bid, 104 5/8 offered, a bond trader said.

The $900 million issue priced at par on Nov. 8.

Macau gaming paper was active and improved on recent news that the government of the Chinese-controlled gaming hub would award new licenses to the city's existing casinos.

The Wynn Macau Ltd. 5 5/8% senior notes due August 2028 traded at 83½ on Wednesday morning, up 2 points, the trader said.

The Melco Resorts Finance Ltd. 5¾% senior notes due July 2028 traded at 80, also up 2 points.

Macau gaming has been especially hard hit by the fallout from China's lockdown response to its ongoing coronavirus crisis, the trader noted.

The primary market remained idle on Wednesday morning, with nary a deal in sight, sources said.

There has been no new issue news thus far in the post-Thanksgiving week.

And it has been over a week since the last new dollar-denominated high-yield issue was priced.

Fund flows

For the second consecutive day, the high-yield ETFs sustained daily cash outflows in excess of $400 million on Tuesday, according to a market source.

The junk ETFs saw $496 million of outflows on Tuesday, after sustaining $430 million of outflows on Monday.

Actively managed high-yield funds, meanwhile, posted modest inflows of $20 million on Tuesday, the source said.

With Wednesday’s daily fund flow totals pending, the combined funds are tracking $380 million of net outflows for the week that will conclude with Wednesday’s close, according to the market source.

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